Following the financial crisis of 2007-08, in-house legal departments started to grow significantly to handle an unprecedented surge of regulatory changes and investigations. While various industries have been affected, this was particularly prevalent in the financial sector.
In times when an organisation is at risk, legal budgets are under far less scrutiny compared with other business departments and board members do not want to be challenged by regulators for not providing their legal function with enough resources to keep the business fully compliant. Avoiding scandal or investigation has provided another good reason to support the legal function with further resources and increase its budget for third-party legal advice to help.
Sure enough, after such surge comes the period for budget restraints and challenges by the procurement functions. Not only outside legal providers, but also the in-house function were requested to “deliver more for less” when the fallout from the financial crisis became less severe. While regulatory change is ongoing and investigations in various industries remain at a high level, legal functions are no longer different to other central functions in business in terms of mounting cost pressures.
As a consequence of these pressures, legal functions now strive for the right balance between outside spend, in-house staffing and technology. There is certainly no silver bullet to achieve a successful balance, but surprisingly only a few legal functions have turned their focus on their operating models and, most importantly, the power of their own in-house data.
As other industries and functions have experienced, we see the ongoing pressure for efficiency in the legal function as an opportunity to transform the operating model and significantly empower the general counsel. By maximising the use of data, it will transform the function from a cost centre to an aligned business-enablement unit.
Technology will empower the legal function and make it a major strategic player
As cost and regulatory pressures mount, in-house legal functions are recognising that merely keeping pace with changing demands and expectations is no longer sufficient. Indeed, there is a growing need to consider new operating models to align with strategic and growth objectives of the organisation, and legal functions are analysing how technology, process and people can help facilitate their transformation journey and drive innovation. Moreover, a common legal function platform will deliver transparency regarding work allocation and workflows.
To be successful, digital transformation in the legal function should be more than a cost-saving exercise. The transparency achieved through the process is the fuel that is driving this revolution. By establishing a common platform that captures critical business information, it will create one robust repository for templates, precedents and knowledge-sharing across the organisation.
Further, it will allow possibly automated triage to help decide what work should be done through self-serve, in-house, an outside panel law firm or an alternative services provider. It will also enhance document automation and enable artificial intelligence-powered applications to improve document drafting and processes continually.
The crucial point is the whole concept of the legal function is evolving, from a cost centre into a business-enablement unit. Those in the legal function no longer view themselves as supporting actors or a “tagged-on” department. The legal function’s position will change; it will become an integral part of the business as an effective business enabler, and by analysing the information in its own expanding data lake it should offer great insights.
For instance, if you are a big manufacturer or retail company and the data of every sales agreement is captured on the legal function platform, analytics will tell how long it usually takes from the first draft of a contract to the signing. Therefore, armed with the right data and analytical tools, the legal function can start predicting when sales will close and, by collaborating with the sales function, informed decisions can be made to create better business outcomes. Increasingly, general counsel will become a most reliable source of sales forecasts.
Additionally, greater analytics of data will engineer further efficiency improvements across the organisation and taking on board feedback is essential. The information that the legal function gathers can help understand and support the painpoints and speed up processes.
Technology will empower the legal function and make it a major strategic player and right now we are at the very start of this new curve. There is so much more transformation in the legal market to come, as more corporations start to update their operating models, realising the value of the legal function to the business.
Looking beyond point solutions, the necessary transformation of the operating model should be viewed as a golden opportunity to drive transparency and efficiency, integrate the legal function into the business and make use of the data it captures. With technology and data analytics improving, there has never been a better time to empower the legal function.
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